Raith missed out on promotion to the top flight after losing to Hibernian in the play-off semi-final, making McKinnon’s departure all but certain.
The Kirkcaldy club yesterday announced: “The search for a new manager has already begun.”
Chief executive Eric Drysdale said: “Everyone at the club is naturally very disappointed that Ray has reached this decision, and we certainly did everything in our power, and then more, to try to retain his services but he leaves Raith Rovers with thanks and best wishes for the future.
“Ray has built a terrific squad of players with tremendous team spirit, and that will be his legacy.”
McKinnon had two spells as a player at United and Raith and joined Rovers as manager last year after three years in charge of Brechin City.
His appointment will provide some cheer after Dundee United were punished for playing ineligible players in their match at Inverness.